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A Cheap-Talkin’ Bureaucrat

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Michael Powell, who runs the Federal Communications Commission, ended a recent visit to the Journal with a discussion of Internet telephony, the next so-called killer application that techno-gurus predictwill do for broadband penetration what e-mail did for the Internet.

The technology, known as Voice Over Internet Protocol, or VOIP, will not only change the way we make phone calls but “change the very nature of communications,” said Mr. Powell. He then went on to describe in impressive detail what all the fuss is about.

VOIP turns a phone call into a cluster of data no different from an instant message or a digital image. And because it’s based on software instead of the circuit-switched network hardware now in use, net telephony is cheaper. For investors, this means VOIP introduces market efficiencies that can be expected to reduce capital expenditures and thus consumer rates.

But never mind all that. The cool part, said Mr. Powell, is that VOIP will allow users to customize their phone service. You can route your home calls to your office or your mobile or both. You can forward voicemail to your e-mail inbox. You can even make wireless calls over the Web using a laptop or hand-held device. Look out for the Blackberry conference call.

Mr. Powell’s biggest concern is keeping his fellow regulators at bay. He knows that, left to their tendencies, Congress, the FCC and the courts will attempt to hoover every high-tech advancement they can into the vast regulatory blob that currently subjects telecommunications to the heaviest taxation of any industry save alcohol and tobacco.

And whaddya know? Shortly after Mr. Powell’s visit came this from CNET reporter Declan McCullagh:

“A ‘temporary’ tax created to pay for the Spanish American War may result in higher fees for Internet telephone calls. The IRS and the Treasury Department have suggested that an existing federal excise tax on phone calls should be interpreted to apply to Voice Over Internet Protocol (VOIP) calls, a move that promises to roil the fast-growing industry and follows similar attempts by state officials to tax or regulate the technology.”

If such a creature exists, Michael Powell is a innovation-oriented free-market bureaucrat. This realization has surprised some on the right because his background wouldn’t suggest that much of a conservative lurked behind that puckish mien.

An antitrust lawyer by training, Mr. Powell came over to the FCC in 1997 from the Justice Department, where he apparently had no trouble aiding Joel Klein’s maniacal and counterproductive pursuit of Microsoft. And after the Bill Clinton appointee took his seat at the agency, Mr. Powell consistently allowed conservative Commissioner Harold Furchtgott-Roth to vote alone. That’s not the kind of track record that earns you kudos from the Heritage Foundation.

However, since being tapped by President Bush for the chairmanship four years ago Mr. Powell has attempted to steer his agency, whose nature is to expand its reach, in an unnatural direction. Mr. Powell’s deregulatory initiatives haven’t gone far enough for some of his conservative critics, but it’s not for lack of trying and certainly hasn’t earned him many left-wing allies.

Mr. Powell’s most significant triumph to date has been overseeing an end to the anticompetitive requirement that the Bell companies lease their networks to rivals, including AT&T and MCI, at discount rates. If Mr. Powell can now draft new rules for local phone competition that encourage investment in more high-speed networks, last-mile broadband could be his legacy.

The chairman has also tried, with less success, to ease outdated media ownership rules that ignore the viability of cable, satellite and the Internet as information outlets. How ridiculous is it that a liberal political organization with a name like has played a major role in blocking an FCC initiative that would recognized the influence of the Web?

This is a debate about content masquerading as a debate about overconcentration. Rest assured that if Rupert Murdoch or Michael Eisner run afoul of antitrust law, capable folks at Justice and the Federal Trade Commission can handle it on a case-by-case basis. As for content “diversity,” that’s probably not something government should be in the business of measuring, which is why we have a First Amendment.

It’s often overlooked that Mr. Powell has had the disadvantage of a White House preoccupied with other domestic matters. Reed Hundt, a predecessor of Mr. Powell and the man responsible for the telecom industrial policy that Mr. Powell is working to dismantle, has bragged of dining regularly with Vice President Al Gore to discuss FCC matters during his tenure heading the commission.

By contrast, the Bush administration seemed to discover telecom only after Ma Bell threatened to run ads against the president in swing states if it didn’t get its way on local phone rules. And it didn’t help matters that Republican Commissioner Kevin Martin, another Bush appointee, was given the green light to vote with Democrats and state legislators to protect the status quo.

To Mr. Bush’s credit, he stared down the threat and did the right thing by backing Mr. Powell. And lately the president has talked up telecom and the need to clear away “the regulatory underbrush.” But such talk has been a long time coming. Indeed, next to the steel-tariffs fumble, Mr. Bush’s neglect of information technology — a sector responsible for almost two-thirds of the rise in labor productivity in the late 1990s — might be his most serious economic misstep.

The good news for the marketplace is that Mr. Powell knows the FCC’s limitations, which by itself places him in a small minority of Washington bureaucrats running powerful regulatory agencies. The bad news is that there are rumors he might quit the post before his term ends in 2007.

Mr. Riley is a senior editorial writer at the Journal.